Little RU loves to help me when we go shopping and I pay for the purchases with my credit card at the checkout. For years, I lifted her onto the counter to help push the buttons on the machine. I tell her when she can push the OK button and when to pull the card out. The cashiers often think it is cute and hand her the receipt while she is up there.
RU treats it like treasure and runs off with it. She claims she wants it to play ‘house’ in our rec room with her toy cash register and ‘store’ toys. Unfortunately, I have to chase her down and tell her no, it is very important for Mama to keep her receipts safe in her purse. I tell her I will have a huge pile of receipts for her to ‘play’ with at the beginning of next month, once I’ve reviewed our spending.
“I know what we spend”
We all think we know what we spend. You tell yourself, “This exercise is a waste; I already know; I don’t need to waste any more time with this.” But I guarantee not only will you be surprised, you will learn something about your spending habits that you can take action on.
If tracking every cent, or dollar that leaves your pocket seems daunting and not worth the effort, consider this. You already have a general idea of where it all goes, that’s good enough right? Wrong. That ‘general idea’ is surprisingly inaccurate. Without fail there will be a hole in your budget that is bigger than you can imagine. Some recurring small expense that you think is innocent, may turn out to be a hidden leak—the explanation as to why there is no extra money at the end of the month.
You really need to track every cost, every spend, every trip to the convenience store, every bill, for a couple of months to get a good picture of your spending habits. One month may not show some of the recurring items that happen only once every few months, so you really need to do it for several months to get the full picture.
Take A “Before” Picture
Before you start, without looking at any bank or credit card statements, write out what you think your spending looks like. Just estimate what you spend on eating out, new clothes, gas for the car, utilities or rent, etc. Try and think of as many categories as you can without peeking at the reality. If some of your spending is sporadic, for example, if you only buy new clothes twice a year, write that in there, $x every 6 months or $x divided by 6.
The categories you chose to sort your spending are totally up to you, and you can change them later. If you want lightbulbs as part of a house maintenance category, good. If you want it part of utilities, that works too. Maybe they belong in your decorating budget, or are consumables with the toilet paper. Break the categories down into whatever makes you comfortable. Lump the utilities together or don’t, put your clothes and the kids clothes together or separate. Keep coffee with restaurants or not, whatever works for you. If you end up wanting more detail in a category you can always go back and break it out later.
While tracking your spending you need to separate your spending into different categories. This will require breaking down your multi-department store bills. Maybe some of your purchases are groceries, some of it is new clothes, and some of it house maintenance.. To save myself the trouble of sorting through a long bill later, I break it into my categories on the belt—right there at the cash register. Groceries go on the conveyor first, I put the divider bar on and then put the next category up, and so on, as many times as I need to (it increases around Christmas time).
Sometimes I ask the cashier for a subtotal at each divider and I take pictures of the subtotal from their screen if I don’t have any paper with me. Usually, I just perform a completely separate payment for each category. They don’t care how many transactions I do, I’ve done more than five for all the categories I shopped for at one time. The person behind me in line might not be impressed, but no one ever commented on it and it makes my accounting so much easier afterward—I used to dread reviewing those receipts.
So, in order to review your receipts for the next 6 months, you have to start keeping track of them. In some cases, with many environmental efforts to minimize paper now in place, you may have to request them. Store them temporarily in one spot in your car, or your wallet, bring them in every day or every week or put them in a small box. Be sure to sit down and divide them into your categories every month. For some people this task in itself may be a big effort and change. There are various apps for tracking receipts. With some apps you can take a picture of the receipt with your phone and it will be saved for you. You can email them to yourself and organize them later. My husband and his workplace used the Expensify App for work expenses during the last 6 months, with surprising success.
Keep in mind too that some receipts are cryptic. If the description of items you bought are so shortened or not described at all, they will mean nothing to you when you sit down to review them a month later. The sooner you classify the purchase in your own words, the more likely you will remember it.
Being my father’s daughter, and having to answer to his accounting system while I was in University, I always kept all my receipts, that part was easy for me. But actually accounting for them once I had a home of my own and a spouse who was also spending money, was a different story. My husband and I kept our finances separate until the day we married, actually until the day I changed my career to follow him in his, and that is when the true tracking started.
My husband’s receipt monitoring does not begin to match my receipt hoarding tendencies, so this alone was a frustration to me. For this reason, we agreed early on, to NO cash transactions. This allowed me to track every cent we spent since it showed up on the joint credit card bill or our bank statement. This worked for us for over twelve years, because we pay our credit card bill in full every month. I don’t recommend this method if you are uncomfortable with credit cards or unable to use them responsibly. Also, we chose a credit card that does not have any fees associated with it and pays us on a points reward system for the money we spend.
Using a Tracking Program
Once my husband and I were on the same page I started collecting the data. The big bills were easy, it’s the small sneaky ones that need to be watched. At the beginning of this process I was using Quicken software for Canada (or Quicken software for U.S.A.) to input all my spending transactions. This was before the software could download the data for you from your bank or credit card company. But, I loved the charting and categorizing that it could do for me. I had learned this skill when acting as bookkeeper for my family when I was in high school. Quicken could also catch on to your spending patterns and offer to schedule them for you to save time entering them all, each month, each week, or each day.
Then came the day, I was updating our spending and up popped a helpful suggestion, “Would you like me to schedule this as a regular transaction?” It was for $9.43 to a popular coffee shop. Were we really that predictable? Did Quicken already know something I didn’t? That day, I gave that particular transaction its own line in the budget. Obviously we needed to track that more closely. To this day that line is still in my budget, and with 5 of us now in the car wanting our drive-through treat, the trips are much less frequent, but much more expensive when they do happen.
For years, I tracked our spending and called what I was doing budgeting. Tracking the transactions after they happen isn’t really budgeting although it does give you the information you need to be more aware of where your money is going which helps to create a budget that will work for you.